"Many of the things that drive quality and costs are going to be linked to payment reductions if they don't perform well," Wolter said.

One of the plans is to bundle hospital care with outpatient care to better coordinate and reduce costs of care.

"What bundling does is it creates an incentive for hospitals to work with the providers in the post acute care setting," Wolter said. "So that would be long term care units, nursing units, transitional care units, home health care, and others."

The focus of all the new payment systems will be rewarding performance, Wolter said.

"It's definitely a change from being paid for every unit of service with no linkages to quality or cost," he said.

At Bassett Healthcare Network, CEO Dr. William Streck said the network isn't worried about reductions in payments from Medicare.

"As Medicare payments would go down to hospitals, insurance payments from the uninsured would go up so there would be some rough balance struck over time," Streck said.

Streck said his hospital needs to adapt to the new future of providing care which will hinge on providing the best quality at a lower cost.

"We have to work our way through that over the next several years," Streck said. "Making sure we take care of our patients even as we build this expanded integrated way to take care of people."

Hospitals say they lose millions each year in uncollected payments from people without insurance.